Volatility (VIX) at New Lows as Market Fears Subside

Volatility (VIX) is at new lows as market fears have continued to subside. Prior to President Trump’s State of the Union address on Tuesday night, the VIX (or CBOE Volatility Index, also known as the ‘Fear Gauge’) dropped to touch its lowest level since early October. The low was around 15, and it’s currently just slightly above that level. Of course, early October was also when stocks began their most recent fall from all-time highs.

So investors’ fear levels are now back down near where they were before the prolonged volatility and market shake-up of the past four months. In the process of this most recent VIX drop, the index has fallen below its 200-day moving average, a significant indication that fear and volatility are indeed on the decline. On Wednesday, volatility was also down, even though markets dropped slightly.

Aside from ongoing speculation over U.S.-China trade negotiations, which Trump did not address in much detail on Tuesday night’s State of the Union, bullish market drivers continue to prevail. This includes a dovish Federal Reserve that seems to be increasingly cooperative with the markets, and a continued march of solid company earnings releases as earnings season begins to wind down. As a result, investor complacency is prevailing once again, and the overall market bias has clearly shifted to the bullish side.

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Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.

A veteran global macro trader/analyst, Bart focuses on major market moves in currencies, commodities, fixed income, and global equity indexes. Bart stresses inter-market correlations and dynamics while keeping a close eye on risk. He has published countless market analysis pieces and has been a guest expert for a variety of major financial media. Contact Bart